New Zealand’s centrist, nationalist New Zealand First Party decided last night to form a coalition Government with the New Zealand Labour Party. The two parties have 44.1 % of the vote and will require the support of the Green Party to form a majority. The Greens will provide confidence and supply and will not be part of the coalition.

Details of the coalition are still being finalised. The Prime Minister designate Jacinda Ardern says the coalition agreement will be released early next week, portfolios will be announced mid-week and Ministers sworn in late in the week.

We do know:

• Mr Peters has been offered the position of Deputy Prime Minister and he is considering this.

• Labour will hold a caucus meeting tomorrow to elect its cabinet.

• The Finance Minister will be Grant Robertson.

• NZ First will hold four Ministerial positions inside cabinet. There has been speculation NZ First MPs to be Ministers will be Rt Hon Winston Peters, Party Deputy Ron Mark, Tracey Martin and Hon Shane Jones.

• NZ First will hold one under-secretary position outside cabinet. Speculation suggests this will be Fletcher Tabiteau.

• Mr Peters would not rule out the possibility of NZ First Ministers holding both the Foreign Affairs and Defence portfolios.

• The Greens have confirmed that after consulting its 150 party delegates that it will support the Labour-NZ First coalition on confidence and supply.

• It is understood the Greens will have three Ministerial positions outside cabinet and one undersecretary.

• Portfolios for the Greens appear to include Associate Climate Change and Environment.

Ms Ardern and the outgoing Prime Minister Rt Hon Bill English learned of Mr Peters decision at the same time as New Zealanders who tuned into the live broadcast of a speech to announce his party’s decision.

In that speech Mr Peters said, "Our perception was the people of this country did want change and we've responded to that." He said the party had to seriously consider a "modified status quo" or a "change" when making its choice following negotiations. He observed, “Far too many New Zealanders have come to view today's capitalism not as their friend but as their foe. Capitalism must regain its human face.”

This is the first time since New Zealand’s first MMP election in 1996 that a party that did not secure the highest percentage of votes has formed a Government. The final count saw National with 44.5 percent, Labour with 36.9 percent, NZ First with 7.2 percent and the Greens with 6.3 percent.

Mr English conceded saying the negotiation outcome was “MMP in New Zealand.” He believes National will be the strongest Opposition party the Parliament has seen. He is unlikely to remain leader of the National Party.

Policies

Labour and NZ First are aligned on key policies. Already both leaders have referenced these:

• Foreign ownership: The PM-designate says the party’s policy of banning foreign ownership of existing houses within the first 100 days will be implemented. The new Government will also restrict foreign ownership of critical infrastructure. These policies will pose complications for NZ’s TPPII negotiations to take place at the November APEC meeting, which Ms Ardern will attend. [The TPP does not allow a ban on foreign land purchases. During the campaign Ms Ardern said she would not rule out pulling out of the trade deal.]

• Monetary policy: There will be changes to the Reserve Bank Act, which governs NZ’s central bank. However Mr Peters said he had not secured his preferred policy of moving to a Singaporean model for monetary policy, which targets a currency level rather than an interest rate level.

• Immigration: Numbers will be reduced but while no numbers have been given, cuts are not expected on the scale advocated by NZ First. Cuts are likely to target international students although Mr Peters did state that his party supported “quality export education.”

• Regional development: Both Ms Ardern and Mr Peters said there would be infrastructure investments in regional NZ to promote exports and provide jobs. Already it is understood the Ministry of Business, Innovation and Employment is establishing a regional development unit, clearly in the expectation that there will be a Minister of Regional Development.

• Climate change: Labour, NZ First and the Greens all want a more urgent approach to climate change. They want to include agriculture in the green house emissions approach.

• Water: it is not clear yet where Labour’s policy for a water royalty on farmers has landed as NZ First opposes the policy.

• Pike River Mine: there will be a manned entry.

Commentary

Jacinda Ardern will be NZ’s second youngest Prime Minister.

She has formed the most MMP-looking coalition arrangement the country has seen.

To form a Government she has secured the support of two small (but not one-man) parties and provided them with ministerial positions.

She describes her arrangement with NZ First as a partnership. NZ First has not negotiated with the Greens choosing to leave the supply and confidence arrangement in the hands of Labour.

The formation of a Labour-NZ First Government ends a nine-year run for the National Party.